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Youth exodus bedevils Adelaide's economy

By Malcolm King - posted Thursday, 31 January 2013


Legend has it that the great blues guitarist Robert Johnson sold his soul to the devil at a county crossroads for fortune and fame. Adelaide is at a crossroads too but its blues are debt and recession.

Adelaide faces the type of problems that confront many mid-sized cities across the western world. There's tension between those who fear development will rob their city of its charm and life style and those who embrace globalization.

But the real fight is for jobs – to create them and hold on to them. Global economic forces, like a mastiff's jaws, are shaking large sections of the Australian labour market and South Australians are feeling the maul. Adelaide is at a historic crossroads.

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From the very beginning South Australia was unlike other states. South Australians were descended from middle class free settlers from the UK who began arriving in the 1830s. Edward Wakefield planned Adelaide from Newgate Prison, having copped a three-year sentence for abducting a schoolgirl heiress. From its very conception, the City of Churches was mired in contradiction and eccentricity.

Wakefield's plan was to invite only those people who could afford to buy land - and the laboring classes could follow later. It was 'Upstairs, Downstairs' writ large. Wakefield wanted a civilized city – not a new Sydney where rum and prostitution ruled.

South Australia has a relatively undiversified economy. The state government places much importance on winning mining and defence contracts as income and employment generators. But these are not long-term investments nor are they driven by private investment or entrepreneurial thinking.

When BHP pulled out of the $30B further development of the Olympic Dam last year, it killed off 5000 potential jobs. Yet The Advertiser ran 'don't worry' stories and showed happy people celebrating local icons such as Farmers Union iced coffee, Coopers Ale, etc. This was very odd.

A week later, Alexander Downer claimed in the same newspaper that South Australia had plenty going for it but he had reservations.

"The trouble with South Australia is it has become frighteningly complacent. There isn't a battle of visions and ideas, just a bunch of Jeremiahs telling anyone with a commitment to progress why it can't be done … The sad Olympic Dam decision may, at last, wake us up and remind us that societies without progress just wither and die," Downer said.

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You know you're in trouble when the voice of Tory privilege starts complaining.

SA has the highest debt in its history at round $5.6 billion and is expected to grow to $9 billion by 2015-16. The Government deficit is $867 million and is projected to drop to $776 million next year. GST revenues dropped in 2011 by $2.8 billion. Money is too tight to mention.

Many of the economic problems such as the decline of parts of the manufacturing sector, unemployment and underemployment, are structural. While the state government cops a pasting in the daily newspaper, it is not totally its fault. Sector decline and unemployment is part of a global trend as new and cheaper labour is sourced offshore. Other local business owners prevaricate about whether to upgrade plant to manufacture higher priced products for export.

South Australian exports fell 9.5 per cent during 2012, posting the nation's worst performance. The state government also plans to effectively close down Education Adelaide in 2015. The agency is responsible for promoting the state to overseas students. Education Adelaide has been extraordinarily successful in bringing overseas students to the City of Churches.

Adelaide has some great selling points. Food prices relative to Sydney and Melbourne are about 15 per cent cheaper. Houses in South Australia are about 20 per cent cheaper than in other capital cities except Hobart. A new three-bedroom house 25 kilometres north of Adelaide (a 40 minute drive) would set buyers back about $320,000. In Sydney, they would pay $700,000.

The only daily newspaper is the News Ltd owned, The Advertiser. Like newspapers around the world, it is dropping in circulation (The Sunday Mail dropped 4.6 percent in the last 12 months). The Advertiser desperately needs competition and to start motivating people to debate some of these serious economic issues.

The Advertiser has some excellent journalists and its Business section is first class. The reporters have been let down by the editorial pitch of the paper. The confected conflict and impact stories are 'so yesterday' that young readers have stopped reading printed news. The large media providers have pitched the news so low in the Adelaide market, that no one of average intelligence can tolerate the insult without having a brain hemorrhage.

Channel Ten news is providing slapstick entertainment bordering on the surreal. When my young relatives ask me what LSD was like in the early 70s, I tell them to watch Channel Ten news. It lacks context, logic or reference and it repeats itself every 15 minutes. With this sort of news, you'd be better off asking your neighbor what's going on.

I call a lack of industry diversity or a large ageing population, 'tide problems'. They manifest themselves over long time periods. For example, SA's manufacturing sector has been contracting for more than 20 years and the Boomers are only now reaching retirement age. Both of these factors will need to be accounted for in terms of declining tax revenues.

President John F Kennedy said a rising tide floats all boats. But if a short painter ties the boats to the wharf, then a falling tide will sink all boats. Unfortunately too many South Australia businesses are still tied to the wharf. The Boomer retirement cliff in Adelaide will drop productivity by about one per cent over 20 years but the real problem will be finding staff for SMEs and the corporate sector on current population growth rates.

According to the ABS, more residents are leaving South Australia to live interstate than are arriving. About 3,000 'croweaters' left between June 2009 and June 2010. This has been the average departure rate since 2000.

That's about 30,000 people not replaced over the last decade from a working population of around 500,000 people. While some might be retirees, the bulk is young people in their late teens, 20s and 30s. That's a corrosive working slowly on the hull of the local economy.

Since 1971/72, there has only been four years when more people have moved to SA than left.

Net overseas migration gains – selected states

Source: ABS Traveller Characteristics Database and ABS Migration Australia (cat. no. 3412.0)

Adelaide is getting a taste of what has been happing in America for 15 years. People are moving from the east coast to the South, Southwest, and Far West in search of jobs. Structural economic change is driving the shift. Intra-national population growth attracts generally midsize firms.

Those cities that have failed to make the transition from a manufacturing-based economy to a service-based economy are in decline. The residents of Flint, Michigan, Cleveland in Ohio and Buffalo and Rochester in New York, are battling brain drain, falling population numbers and contraction or closure of their traditional manufacturing bases. The combination of employment collapse and population drain – even before the GFC - has meant that whole blocks of these cities are now abandoned.

That is why small and medium sized businesses with a highly skilled and educated population to work in them are vital to the future of Adelaide. SME's will drive the new service economy and a key tool will be the new digital network.

Apart from relatively cheap food and housing, Adelaide has a functioning port and an excellent rail link to Darwin. It has a well-educated workforce, although employers could make more use of up-skilling programs. It needs to produce high end manufacturing goods as well as bio fuels, specialist international education (allow the graduates to stay), increase food production to Asia and establish SA TAFE programs in India.

Older Adelaidians have nostalgic memories of Fritz (compressed pork), chocolate frog cakes and sawdust on the butcher-shop floor. These are Circe's enchantments but meanwhile, GST revenues are falling, the construction industry is moribund and young people are heading to the eastern states in droves.

The leaching of some of Adelaide's best brains and entrepreneurial spirit is very dangerous. These people start up companies, they invent new technology and they contribute to the intellectual and culture life of the city. While currency prices and retail trade issues tend to be ephemeral (although the AU$ has remained high for three years), the deep structural problems are a major concern, as they will affect everyone and especially young generations.

 

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An edited version of this article appeared recently in New Matilda.



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About the Author

Malcolm King is a journalist and professional writer. He was an associate director at DEEWR Labour Market Strategy in Canberra and the senior communications strategist at Carnegie Mellon University in Adelaide. He runs a writing business called Republic.

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